Market report: Bancassurers get a mauling as bears eye dividends

Bancassurers get a mauling as bears eye dividends

Bears were mauling bancassurers yesterday amid mounting concerns that they will be forced to slash dividends should global equity markets continue to wilt.

Hardest hit was Abbey National, which owns Scottish Mutual and last week issued a shock profits warning. The shares fell 44 to 789p.

In the same sector HBOS, owner of Clerical Medical and the unit-linked business of Equitable Life, lost 28 to 724p and Lloyds TSB, which runs the Scottish Widows life operation, fell 15 to 647.5p.

Similar fears over the health of the insurance industry saw Legal & General marked 3.75 lower to 130.25p and CGNU fall 8 to 539.5p.

Traders continued to suggest that UK life assurers were being forced to sell equities to buy bonds in order to meet regulatory solvency requirements. This was reckoned to have put the skids under share prices in London, where the benchmark FTSE 100 fell 54.8 to 4702 as 2.4 billion shares changed hands.

The losses came despite a steadier performance by Wall Street after a government report showed that the US housing market was in better shape than had been thought. The Dow Jones was about 20 points higher as London closed, while the Nasdaq was up around 10.

At home, fears over generic competition for key drugs once again saw pharmaceutical groups marked sharply lower. Shire Pharma fell 20.75 to 549.75p after Eon Labs said it had won approval for the second generic version of Adderall, Shire's attention deficit disorder treatment.

Astrazeneca lost 64p to £28.23. Prilosec, its top-selling ulcer treatment, is thought likely to face generic competition in the US by the end of the year.

GlaxoSmithkline the world's second biggest drug maker, fell 9p to £13.91. The shares have tumbled by about 15pc since May 23, when a US judge voided patents for augmentin, an antibiotic with annual revenue of $2 billion, paving the way for cheaper competitors.

Medical tools maker GyrusGroup was steadier. The shares edged .5 lower to 231p as the company revealed that it had won regulatory approval from the American Food and Drug Administration for a device that uses heat to shrink swollen tonsils. Bears have savaged Gyrus recently amid speculation - denied by the company - that a profits warning was on the cards.

Telecoms and related issues were marked lower, too, on concerns that mobile phone operator MmO2 (down 1.25 at 38.5p) had set over-optimistic targets for the amount customers would be prepared to pay for 3G mobile services. Bigger rival Vodafone Group fell 3 to 93.25p and ARM Holdings, whose microchip designs are used in about 80pc of the world's mobile phones, lost 4 to 153.5p, its lowest since late 1999. Although recently relegated from the FTSE 100, ARM remains a constituent of the FTSE Techmark 100, which edged 5.74 lower to 897.12.

Concerns over earnings sparked losses that were steeper still for technology companies in the FTSE 250, which fell 30.8 to 5711.7. Intelligent search software company Autonomy Corporation lost 17.5 to 287.5p.

There was better news for Misys shareholders. The software group was chased 10.75 higher to 233p ahead of today's trading update. Particularly strong performances were expected from the group's healthcare and financial services businesses.

The City applauded full-year results from Northgate Information Solutions, which advanced 4.5 to 27.5p. The IT services minnow posted profits of £8.66m in the year to April 30, compared with £2.2m a year earlier.

Emblaze Systems jumped 15 to 108p as WestLB Panmure, its broker, said buy following earlier news of a contract to supply its video-streaming software to Chunghwa Telecom of Taiwan, a state-owned telecoms group.

Chemicals and paints group ICI was also among those to improve following positive comments from several brokers.

The shares advanced 16 to 308p after Lehman Brothers said the planned sale of ICI's 30pc stake in debt-laden Huntsman International of the US for about £300m would raise around £60m more than expected. Deutsche Bank also maintained its target price of 330p for the shares and rated them a trading buy.

Lehman upgraded its ratings on several oil stocks, too. The broker reckoned BG Group's lack of refining and market exposure should see it with the most robust earnings in the sector this year. It recommended clients buy the shares, which edged .5 higher to 287p. In the same sector, Lehman said BP was no longer a sell since the shares had fallen by 16pc in the second quarter. They were 1 better at 541p.

Meanwhile BAE Systems downplayed recent speculation that it is poised to sell its 25pc stake in Astrium, Europe's biggest space company, to the European Aeronautic Defence and Space Co, which owns the reamining 75pc. The aerospace and defence group added 10.5 to 342.5p.

Directors of some of the smaller companies were taking advantage of recent weakness in share prices to snap up stock. David Martell, chief executive of traffic information provider Trafficmaster, picked up 100,00 shares at 30p. They advanced 6 to 35p.